TaxTMI 
TaxTMI 
1996 (9) TMI 611
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....Before discussing the facts of the case, Misc. Application Nos. E/Misc./296/93-C and E/Misc./34 were taken up along with Misc. Application No. E/Misc./35/96-C. By Misc. Application No. E/Misc. Petition/296/93C, it was prayed by the department that the opinion of CCCN Brussels circulated under Circular No. 1/93-CX. 3 (F. No. 103/3/91-CX. 3), dated 17-3-1993 may be taken on record as additional evidence. The Counsel for the respondents [M/s. Muller & Phipps (India) Ltd.] does not object to taking on record the opinion of CCCN, Brussels. In the result, we allow the Misc. Application No. E/296/93C. 3. M/s. Muller & Phipps (India) Ltd. have filed Misc. Application No. E/34/96C. By this Misc. Application, the respondents requested for taking the following on record : (i) Copy of the certificate dated 29-7-1991 of the Drugs Controller (India); (ii) Copy of the letter dated 12th April, 1993, addressed by Mr. R.D. Shinde, Asstt. Collector of Central Excise, Division K-II Bombay to the head of the Pharmacology Department, Sir J.J. Group of Hospitals, Bombay. (iii) Copy of the reply date....
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....by the Collector and directed the Asstt. Collector to file an appeal with the Collector Central Excise, Bombay. The Collector Central Excise (Appeals), Bombay set aside the appeal filed by the department on the ground that the ingredients contained in Johnson's prickly heat powder are similar to those in nycil manufactured by M/s. Glaxo Laboratories and therefore, there is no reason to give separate treatment to Johnson's prickly heat powder in comparison with Glaxo's nycil powder. Against this order of ld. Collector (Appeals), the Commissioner, Central Excise, Bombay has preferred these four appeals before the Tribunal. 6. Appeal No. E/3710/87C : The facts of the case, in brief, are that M/s. Muller & Phipps (India) Ltd. (hereinafter referred to as appellants) submitted a C/List No. 4/85-86 effective from 25-3-1985 for the product 'Phipps processed talc' 150 gms. claiming the classification for the product under Tariff Item 14E and claiming its dutiability at a rate of 15% ad valorem. They had filed this classification list as there was a change of Central Excise duty for Tariff Item No. 14E. Some changes were made in the tariff description of Tariff Entry No. 14F....
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....sificati- on dispute of Phipps Processed Talc for Prickly Heat under old tariff Order No. KII/38 /ch/85 dt. 31-10-85 Order-in-appeal No. PPM-561-562/BI- 254-255/87 dt. 20-7-87 [period involved No. 185-86] old tariff E/3710/87-C [Asses-ses Ap-peal] 8. Shri R.G. Sheth, the ld. Advocate appeared for M/s. Muller & Phipps (India) Ltd. in Appeal No. E/3710/87C. Shri J.M. Sharma, the ld. JDR appeared for the Revenue and Shri Aspi Chinoy, Senior Advocate with Shri D.B. Shroff, Advocate appeared for the assessees. It was argued before us that the entire dispute arose on account of budgetary changes effected on 17-3-1985, that the dispute was whether Johnson's prickly heat powder was classifiable under Heading No. 33.04 or 30.04. For the sake of clarity, Heading Nos. 33.04 and 30.04 are reproduced below :- Heading No. Sub-heading No. Description of goods 33.04 3304.00 Beauty or make-up preparations and preparations for the care of the skin (other than medicaments), including sunscreen and suntan preparations manicure or pedicure preparations. 30.04 3004.00 Wadding, gauze, bandages and similar articles (for exa....
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....use in manicure or chiropody, sun-burn, oreventive (sic) preparations and subtan preparations, barrier creams to give protection against skin irritants, persona1 (body) deodorants, depilatories. (ii) Preparations for the care of the hair, such as a brilliantines, perfumed hair oils, hair lotions, pomades and creams, hair dyes, shampoos whether or not containing soap or organic surface active agents. (iii) Shaving creams, whether or not containing soap or organic surface active agents. Eplanation I - "Alcohol, "Opium" , "Indian hemp", "Narcotic Drug" and "Narcotics" have the meanings respectively assigned to them in Section 2 of the Medicinal and Toilet Preparation (Excise Duties) Act, 1955. Explanation II - This item includes cosmetics and toilet preparations whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value. Explanation III - This item includes unmixed products only when they are in packing of a kind sold to the consumer and put up with labels, literature or other indications that th....
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.... use against prickly heat and was advertised as giving quick relief to prickly heat irritation and destroying fungi; that after careful consideration of the facts and circumstances of the case, the Secretariat opined that 'Dakosan' should be classified in Heading 33.07 (sub-heading 3307.90) of the Harmonized System since the product had the essential character of a toilet preparation. The Secretariat also placed reliance on Note 1(d) to Chapter 30 which excludes preparations of Headings 33.03 to 33.07 even if they have therapeutic or prophylactic properties. It was also recommended that the three products namely, nycil, shower to shower and Johnson's prickly heat powder are described as prickly heat powder, therefore, they may be classified under sub-heading 3307.90. It was also suggested that in case India Government disagreed with this recommendation the Secretariat was prepared to re-examine the matter on the basis of additional information. The Additional information was supplied by the Govt. of India. C.C. Council Secretariat commented that by virtue of Note 1(d) to Chapter 30 preparations of Headings 33.03 to 33.07 are excluded from Chapter 30 even if they have therapeutic or....
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....%) but no boric acid; that chlorphenesin, an ingredient of nycil prickly heat powder is described as having antibacterial, antifungal and antitrichomonal properties and is used mainly for the prophylactic and treatment of dermatophytoses of the feet and other sites : that according to Martindale (Page 1714), the Council of the European Communities has issued a directive relating to cosmetic products indicating that boric acid can be used in cosmetics in specified maximum concentrations; that for example the concentration of boric acid in talcs is limited to 5%. The Secretariat therefore opined that in view of this information, it would appear that the quantity of 5% boric acid contained in the products at issue would not require their classification as medicaments nor prevent their classifications as preparations of Chapter 33. The Secretariat also invited Committee's attention to the classification decisions taken at the Committee's 4th Session with respect to two products ('EAU Precieuse' lotion and listerine antiseptic' mouth wash) containing boric acid which were classified in Chapter 33 in view of the subsidiary nature of their pharmaceutical ingredients. 12. The Secre....
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.... "95. Prohibition of sale of distribution unless labelled that subject of the other provisions of these Rules, no person shall sell or distribute any drug (including a patent or proprietary medicine) unless it is labelled in accordance with these rules". That Rule 96 prescribed the manner of labelling. Sub-rule (B) (ii) provided for a correct statement of the net content in terms of weight, measure, volume, number of units of contents, number of units of capacity, as the case may be and the weight, measure and volume shall be expressed in metric system; that their product 'Johnson's prickly heat powder' conformed to these requirements and other requirements of the Drugs and Pharmaceuticals Act and Rules framed thereunder. 14. From the above submissions, we find that two issues have arisen. The first was that there was no special occasion to change the practice of classification all of a sudden and the second issue was that the product was drug as it was manufactured and sold under a drug licence. A lot of case-law was cited and relied upon by both sides on these 2 issues. 15. Commenting on the recommendation of the Harmonized System Committee, the ld. ....
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....7 Cr. L. J-1325 had held from the formula as mentioned on the carton, it prima facie appears that boroline contains certain medicines and therefore, it was a drug. Now examining the composition of the prickly heat powders in the present case we find that they contain boric acid 5%, zinc oxide 10% to 16% and salicylic acid 0.8% to 1.5% in addition to processed talc. It was argued that all through prickly heat powders were being assessed to duty as P.P. Medicines; that there was no change in the ingredients nor in the process of manufacture and thus there was no cause to change the classification even if the Budget brought in a new explanation. This argument appears to be attractive at first sight but when we look into it a little deeper we find that there was substantial change brought into effect for classification of products under 14E & 14F of the erstwhile Central Excise Tariff as the provisions of subsidiary effect or subsidiary product was introduced for the first time w.e.f. 17-3-1985. This explanation required re-examination of certain products which had the curative or prophylactic properties. It was to be examined in respect of such products whether the curative or prophyl....
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....eld that there is no doubt that the product Mediker is considered as anti-lice treatment and it is recommended for those people who are infected with lice. It was also held by the Tribunal that anti-lice treatment is not subsidiary to the cosmetics function but is the main function and therefore, held that the product was classifiable under Heading 30.03 as medicament. 21. On analysis of the ratio of this judgment, we find that the issue boils down to what is the essential function and the subsidiary function of the product. In the case of Mediker the essential function was to act as anti-lice where as in the case of prickly heat powders, the active function of the medical ingredients is only a subsidiary function to prevent prickly heat as the proportion of ingredients present in the product was not significant enough to provide it the essential character of a medicament and thus the two are clearly distinguishable. 22. The ld. Counsel also submitted that this Tribunal in the case of C.C.E., Bombay-I v. Pharmaceutical Capsules Laboratories reported in 1986 (25) E.L.T. 211 in para 4 of its order had held "We have also a very clear pronouncement of the Madhya Pradesh....
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....nded that no patent medicine could come into the market unless it had so complied and these goods would not be marketable without such compliance. Mr. Roy Chowdhury drew my attention to certain observations in Crales on Statute Law, Sixth Edition, at page 145. It appears to me that manufacture of patent and proprietary medicine can only be completed when it is in accordance with the provisions of Drugs Act. There cannot be manufacture of patent and proprietary medicines unless they are in accordance with Drugs Act. Indeed Section 18 of the Drugs Act prohibits manufacture and sale of drugs unless certain things are contained in the labels of such drugs. Therefore, it appears to me that the definition of the Drugs Act is relevant even prior to the introduction of sub-clause (iii) of S. 2(f) of the Central Excises and Salt Act, 1944. In the case of Mayor of Portsmouth v. Smith (1885) 10 AC 364 (HL) at p. 371 Lord Blackburn had observed: "Where a single section of an Act is introduced into other subsequent Act, it must be read in this sense which it bore in the original Act from which it was taken, and consequently it is perfectly legitimate to refer to all the rest of that Ac....
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....sp;On scrutiny of the aforesaid judgments we find that these judgments are in respect of items prior to the introduction of the explanation under T.I. 14F of the erstwhile Central Excise Tariff and hence not very relevant. 24. The ld. Counsel also referred to this Tribunal's decision in the case of Pasteur Laboratories (P) Ltd. v. C.C.E., Calcutta reported in 1987 (37) E.L.T. 192 in paras 5, 7, 8, 20, 27 and 31 had held as under : "5. It is submitted by the learned Advocates that the appellant company are manufacturing different drugs and medicinal preparations, in including injectable and life saving drugs such transmission fluids, under a licence to manufacture drugs issued by the Drug Control Authority of the State under the Drugs and Cosmetics Rules, 1945. Appellants have never manufactured any cosmetics or toilet preparations and have no licence for their manufacture. It is claimed that the impugned products are basically drugs or medicinal preparations for use in external treatment or for prevention of ailment. It is submitted that Patent or proprietary medicines can be differentiated from cosmetics on the basis of therapeutic value, intended users, identific....
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....E.L.T. 485 specially he referred to paras 2, 4, 18, 19, 20, 22, 29, 31, 32, 35 and 38 of the order. 26. We find that the facts in the case before us and the one decided by the Apex Court are different. In the case of BPL Pharmaceutical, the product 'selsun' an anti-dandruff preparation containing 2.5% selenium sulphide which is full therapeutic limit permissible as per pharmacopoeia whereas in the case before us the product contained boric acid 5% and salicylic acid 0.8% to 1.5% which according to the opinion of the Harmonised Systems Committee of CCCN our Apex body on the subject opined that these quantities were not significant for giving the essential character as a medicament. We find that the facts are different. We also observe that there is nothing in the label affixed to the containers of the prickly heat powder to show that it was a medicine to be used under a doctor's advice or under a doctor's prescription. We also observe that the product is not known as a prominent medicine but only as an aid to prevent prickly heat. We respectfully agree that a classification of a product depends on the true nature of the product. 27. Quoting extensively from the Drugs....
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....ted under Sales Tax Act whereas we are dealing with a case under the Central Excises and Salt Act, 1944. The parameters for levy and collection of the two cases may be different. Nothing has been produced before us to prove that the relevant provisions of the two Acts are pari materia. Further we find that Explanation II under T.I. 14F reads : "Explanation II. - This item includes cosmetics and toilet preparations whether or not contain subsidiary pharmaceutical or antiseptic constituents or are held out as having subsidiary curative or prophylactic value." This explanation assumes importance inasmuch as that cosmetics and toilet preparations classifiable under T.I. 14F may have subsidiary curative or prophylactic value. Therefore, the decision in the Sales Tax case is clearly distinguishable. 30. Summing up the arguments, the ld. Counsels submitted that (a) since uptil now prickly heat powder had been assessed under T.I. 14E it should continue to be assessed under T.I. 14E as there was no change in composition or process of manufacture. (b) prickly heat powder is expressly meant for alleviation and treatment....
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....actic value" The issue for determination for purpose of this explanation is whether the preparation before us contains subsidiary pharmaceuticals or antiseptic constituents and the second issue is whether the preparation is held out as having subsidiary curative or prophylactic value. Now examining the product before us, we find that the composition of the product `prickly heat powder' is salicylic acid 0.8% to 1.5%, boric acid 5%, zinc oxide 10% to 16%, talc base of hydrate Magnesium silicate. Now the question is whether salicylic acid .8% to 1.5% boric acid 5% and zinc oxide 10% to 16% are subsidiary pharmaceutical or antiseptic constituents. The assessees represented that these ingredients were not subsidiary but were significant ingredients. In support of their contention, they cited and relied upon the Drug Controller's opinion wherein the Drug Controller in the case of shower to shower had opined that because of high conc. of boric acid, the product cannot be used as talcum powder. Against this, we find that Secretariat of the C.C.C.N. in their note in para 28 opined that "In researching the question of the classification of the prickly heat powders of concern to the India....
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....heir classification as medicaments nor prevent their classifications as preparations of Chapter 33. 32. As concerns the classification of the products at issue, the Secretariat would question whether `shower to shower' and `Johnson's prickly heat powders,' containing only boric acid, salicylic acid or zinc oxide on a talc base, have the essential character of medicaments of Chapter 30 in view of the low quantities of pharamaceutical substances present. Based on their use and composition, the Secretariat would lean towards classification of these two products as preparations for the care of the skin in Heading 33.04. In this connexion, it would be noted that, upon further reflection, the Secretariat also believes that `Dakosan' Prickly heat powder should be classified in Heading 33.04." 31. We also observe that Explanation II to T.I. 14F of the erstwhile C.Ex. Tariff provides that this item includes cosmetics and toilet preparations holding out as having subsidiary curative or prophylactic value. Now reading the instructions on the container we find that it is holding out that prickly heat powder aids effective prevention of prickly heat. It is inferred from the fac....
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....ured under drug licence. (c) The Food and Drugs Administration had certified it as a drug. (d) That the Drug Controller had categorically opined that Selenium Sulphide present in selsun was in a therapeutic concentration. (e) The brand name `Selsun' was derived from the name of the drug selenium sulphide. (f) It was included as a drug in the National Formulary, U.S. Pharmacopoeia and the Merck Index. (g) It fulfilled the requirements of a drug as understood in common parlance. (h) Selenium Sulphide was sold only on medical prescription and used as a medicine. (i) Selsun was not a medicated shampoo which was recommended as conditioners with subsidiary medicinal effect. Selsun was on the contrary being recommended by physicians. (j) Various standard books and treati....